Smart Borrower Blog

Bigger Mortgages Loom Over Baby Boomers

Sep 25th, 2013 @ 7:47 PM by Amber Nelson

Those near retirement are headed into their golden years with more and more mortgage debt, according to a recent paper , which could spell financial trouble for those retirees in the next decade.

Research from economists AnnaMaria Lusardi of George Washington University and Olivia Mitchell of the Wharton School of the University of Pennsylvania in a recently published paper found that more baby boomers who were close to retirement in 2008 had outstanding balances on their mortgages than did the previous generation of retirees. Lusardi and Mitchell pulled data from the University of Michigan’s Health and Retirement Survey which showed that in 1992, 40.5 percent of those between the ages of 56 and 61 still had a home loan to pay off. In 2008, that number jumped to 47.8 percent for the new cohort.

More significant and more troubling than that statistic was the difference in how much near-retirees still owed. The 1992 group had a remaining balance on average of $26,000, while the 2008 group had an average of $66,000, a sum much bigger than inflation alone could have caused. Lusardi and Mitchell wrote that this made “early boomers significantly more financially fragile” than the earlier generation.

The changing dynamics of the housing market have played a large part in the mortgage debt shift, with the 2008 cohort having feeling the effects of the housing bubble and bust. During the boom, mortgage borrowers were able to take out larger loans with much lower down payments, most only putting down between 5 percent and 10 percent. With a smaller share of equity, boomers had a much bigger debt load heading into retirement than the 1992 group.

Couple that with the boomers’ increased propensity to use riskier financial avenues like payday loans, credit cards and borrowing from their retirement accounts, and you have a recipe for major sticker shock when these boomers begin their work-free phase of life.


About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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